In markets, the "pain trade" is when some asset goes in a direction that causes the most pain to the most amount of people.
In a note to clients this evening, Mike O'Rourke of JonesTrading dubbed falling Treasuries (and therefore surging yields) the new pain trade:
Much of the pain trade talk over the past two years has been the move higher in equities. These days, there is a new pain trade--being long bonds. There is a major tidal shift occurring here. Following 5 years of the Federal Reserve, Commercial Banks and investors piling into bonds the momentum is finally reversing.
Normally, we would take the view that investors should not be scared of a 10 year Treasury yield below 3%. The problem is that the behavior of the buyers of these instruments over the past few years has hardly been normal.
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